Nigeria’s manufacturing sector faces many challenges ranging from insecurity, near to non-existent electricity, poor infrastructure, multiple taxes, foreign exchange scarcity, and high diesel prices to power generators. The brewery sector is no exception. BusinessDay recently engaged HANS ESSAADI, the managing director of Nigerian Breweries Plc, who was appointed in May last year, on these issues. DANIEL OBI brings the excerpts:
Nigerian Breweries has been operating in Nigeria for the last seven and a half decades; having started operation in 1946, what are the success factors?
It is the people. It is the creativity and resilience of Nigerian Brewery’s team over the 75 years. This is a huge legacy. However, we have had many challenges, but we have overcome many of them. Heineken is a significant shareholder, and we have benefited from the platform as part of a global corporation, getting access to the exemplary practices and specialist experts to make sure that we weather the storm in the business. This has made us what we are today. People are great, but we need to make the products, get them to the consumer, and delight them; otherwise, there will beno sales and revenue. So in summary, I would say that our workforce, our consumers, the whole portfolio of brands and the way we package them to our consumers are the success factors.
Despite COVID-19 and its associated problems, NB Plc still posted growth. Kindly shed light on this and the contributing factors?
It is always great to talk about success, but how did you get there? The critical factor is the kind of brands you put in front of the consumer. We make sure we put quality beer in frontof the consumer. It is also important to realize that the consumershave changed over the years. We must evolve.It is not the biggest but the most adaptable company that wins and continues to win. We are now with quite significant changes we have made to our portfolio in the last few years. Not many have heard about Life and Goldberg until three years ago.
Are you saying that you are bringing new products while responding to the competition?
It is not responding to competition but listening to consumers. There’s a big difference. Now, what we have to be very honest that the competitive environment in Nigeria has changed. It has become more competitive. It is not bad as it puts every player on their toes. But we have to listen to consumers.
NB Plc has seriously been challenged by competition; how are you responding to this?
In my view, Competition is a good thing. It means everyone is in a constant drive to improve their offerings and serve the consumer better. We will continue to make our brands available in the right channels, create unique experiences when consumers have any course to interact with our brands, and continue to make great tasting products with the highest quality standards possible.
If we do all these, we believe our brands will continue to stand out in the market.
What is Nigerian Breweries’ market share today?
We cannot reveal market share, but we are significantly leading in some beer lager and malt. We are challengers in stout. We are a big player in other segments. There is no one answer, but we are big enough. We lead in quite a few segments, but we are not leading everywhere.
You met the increase of N10 on excise duty; what is your response to this, and how is your company responding to the policy?
As members of the Manufacturers Association of Nigeria, we have engaged, and we will continue to engage with the government on issues that affect the manufacturing industry such as this one.
We are well abreast of the state of Nigeria’s economy and the urgent need to boost the revenue profile of government. This we understand is critical to addressing the recurrent budget deficit and support government in discharging its obligations to the citizens.
However, excise tax is a consumer tax in the end. Macro-economic indices and purchasing power of Nigerian consumers have not improved over the years but have been further worsened by the impact of the COVID -19 pandemic. Non-alcoholic drinks have formed part of people’s daily meals and when consumed responsibly form part of a balanced lifestyle. If it is prized beyond the reach of Nigerians, we will be inflicting more hardship on them.
Read also: How manufacturing industry drove company income tax in Q1
There are challenges operating in Nigeria, just like in other markets. We have the issue of insecurity, exchange rate difficulties, Russian-Ukraine war badly impacting the importation of wheat. How have all these affected your operations in Nigeria?
They are all affecting business, but the essential thing is how you overcome them because there are challenges, and it will continue to be the case. We were coming from COVID-19 and stumbled into the next crisis of the Russia-Ukraine war. Malt and barley form a significant part of our production; 25 percent of it comes from Ukraine and Russia. This is a considerable challenge.
Commodity prices generally are moving up. Locally, the prices of diesel and gas we use to operate our facilities have gone up. When you wake up in the morning, there are lots of challenges. But as manufacturers, we have to overcome by being ahead of the game. We see things coming, prices going up, and we can purchase early. We use sorghum quite significantly in our products, and we do this for local sourcing purposes and to make sure we have availability of the materials for production. We don’t know what will happen next in the malt and barley market. However, we have a resilient team, we are creative, we are positive, and we always overcome with all this positive energy.
We will continue to make our brands available in the right channels, create unique experiences when consumers have any course to interact with our brands, and continue to make great tasting products
If you look at the raw materials we use, many things are not available locally, especially with the challenges of getting to the 50 percent. But we still want to do more to increase the local sourcing.
We are confident that the longer-term fundamentals of the Nigerian beer market remain positive
Explain more on the local sourcing of materials?
We use sorghum, and it depends on the product. We use malt and barley in premium products, but in 33 Export and Goldberg, we use sorghum. It is not easy. We use a combination of malt, barley and sorghum, and presently, our local sourcing is at 50 percent. If you look at the raw materials we use, many things are not available locally, especially with the challenges of getting to the 50 percent. But we still want to do more to increase the local sourcing.
How are you working to limit the impact of inflation on the prices of your products to make them affordable to consumers?
We recognise that the pressure on consumer purchasing power is one of the main challenges now. The combination of naira devaluation and inflation makes it hard when you are thinking of affordability.
So we try to minimise as much as possible to keep our products affordable while protecting the operating margin of our business. We do this by optimizing purchases and being more efficient, and we can benefit from the ecosystem as we have been here for a long time. So, despite inflation, if we can make sure that our input cost is under control, we do not need to pass on the inflation to the consumer. But if you go to supermarkets, prices change every day, so it is challenging to warehouse all the costs. So, we hope for policies that will help control the devaluation of the naira and combat inflation.
Let me also state that we are confident that the longer-term fundamentals of the Nigerian beer market remain positive. In the medium term, Nigeria’s young and growing population; a growing middle class; continued rising levels of urbanization and improving political stability, would support the beer market growth.
The industry is presently engaging with the government on how to grow the beer industry, following challenges and the introduction of excise duty; what are you presenting to the government?
The starting point is that Nigeria is a big country, the third-largest country in population. We have nine breweries across the country, but we must grow our footprint. Today, there are an estimated 220 million Nigerians, and as the population grows, we need more production capacity. To do that, we need to import our equipment; we need foreign exchange to be able to purchase equipment. We believe in Nigeria. We are investing in the East and North. We are discussing a fair share of forex with the government to buy the materials and equipment to produce our drinks, delight Nigerian consumers, protect employees, pay taxes and create employment.
When you compare beer consumption in Nigeria with other countries, what picture do you see?
Let’s start with per capita consumption; for the average Nigerian, how much beer do they drink? The answer is an average of 10-12 litres. It would interest you to know that the standard in Europe is 70 litres. In some other European countries, it is about 100 litres. I can say that Nigeria is low. Again, if you look at the top of the pyramid, that is people who have money, that is the middle and high class, it is less than 10 percent of the population. The 90% left are not able to buy beer. If they have a good day, they purchase Life and Goldberg, and when they have a fantastic time, they buy Heineken, and when they have an average day, they don’t buy beer. The per capita consumption of beer is low across Africa. Nigerians will claim they drink beer, but many poor people cannot afford it.
With COVID- 19 exiting, are you back to normal working routines? What would you say was the impact of the pandemic on your operation?
Yes, we are back to normal working routines, but our employees will continue to enjoy flexible work hours of resumption, as well as the option of working from home, subject to agreement with their managers.
We are very conscious about the risks of COVID when we organise events. As such, we strictly adher to the safety guidelines shared by the state and federal governments on events and mass gatherings.
For our employees, we ensured that COVID vaccines and booster shots were made available for them, their spouses and eligible dependants. Apart from the provision of hand sanitizers, facemasks, washing stations, etc, we also continue to provide up to date information on the pandemic, supported by fully operational in-house clinics across all our brewery locations to attend to employees’ medical needs.
Like many organisations across the world, our revenues and profits suffered a decline. The figures are public knowledge. Again, I have to thank our staff, partners and customers for sticking with us throughout what was a difficult year. That we emerged as the only brewer in Nigeria to declare a profit in 2020 is a reminder of the support and patronage we enjoy from our customers, and we don’t take it for granted.
Nigerian Breweries used to have attractive consumer campaigns such as Star Trek, Star Jam, and Gulder Ultimate Search, which your company just reintroduced last year. Do you think resting them did not have a negative impact on your brands?
One of our core values is enjoyment. Music, sports and reality shows are excellent avenues to build the bonds between families and friends, while providing them with the enjoyment and entertainment they need.
These are some of the reasons why we ventured into those sponsorships, and we are proud that Nigerian Breweries was one of the first companies to sponsor completely made in Nigeria reality programmes.
As we have shown with the relaunch of Gulder Ultimate Search last year, we remain open to sponsoring new programmes or relaunching the old ones, but this is subject to financial considerations among other factors. Once we decide to do so, you will be one of the first to know!
You recently celebrated 75 years in Nigeria; what is the projection for the following years?
We have to continue to show and demonstrate adaptability. The way we started 75 years ago is now totally different circumstances.
Now, the speed with which the world is changing makes it more daunting than ever before. If we did something new in the 1960s, we could stick to that for ten years. But if you do something new today, you can only stick to it for six months. So the adaptability and the speed of improving things around new products, processes, and people capabilities becomes very significant for success in the next few years. This is what we need to do.
